India exploring a maritime counterpart to its vehicle scrappage policy

India is considering a maritime version of its vehicle scrappage policy, with plans to introduce Ship Breaking Credit Notes (SBCNs) — a new incentive designed to encourage ship recycling and domestic shipbuilding. The initiative, proposed by the Ministry of Ports, Shipping and Waterways (MoPSW), would allow shipowners to earn credit when dismantling old vessels at certified Indian yards and redeem it as a discount when ordering new ships from Indian shipyards.

The idea mirrors the Vehicle Scrappage Policy 2024, under which car buyers receive a small discount when purchasing a new vehicle after scrapping an old one. Similarly, the SBCN aims to create a circular value chain in the maritime sector — turning retired vessels into credits that can stimulate demand for new, locally built ships while promoting environmentally responsible recycling.

According to the 165-page draft guidelines for the Ship Building Financial Assistance Scheme (SBFAS), prepared by a committee comprising officials from MoPSW, the Directorate General of Shipping, Cochin Shipyard, Indian Register of Shipping, Gujarat Maritime Board, and several industry associations, the SBCN will grant shipowners a credit worth 40% of the scrapped vessel’s value if the ship is dismantled at an environmentally compliant Indian recycling yard, in line with the Hong Kong International Convention standards.

However, the benefit comes with limits. The credit note can be used only to offset up to 5% of the cost of a new vessel ordered from an Indian shipyard. For example, if a shipowner places a ₹100 crore order, the maximum discount available through credits would be ₹5 crore. The notes remain valid for three years, starting from the date they are linked to a new shipbuilding contract, not from the date of scrapping.

SBCNs will also be transferable — allowing shipowners who do not plan to order new vessels to sell or transfer their credits to others investing in Indian shipyards. Multiple notes can be combined for a single order, though each must be redeemed in full. To prevent inflated claims, the scrap value will be determined based on the lowest of three independent international valuations, the actual demolition contract, and a certified chartered accountant’s assessment. Credits will only be issued after the recycling process is fully completed, ensuring transparency and accountability.

The SBCN programme is part of the broader ₹24,736 crore Shipbuilding Financial Assistance Scheme, with around ₹4,000 crore earmarked specifically for this initiative.

While the proposed system comes with several safeguards and eligibility conditions, it represents a significant policy shift — creating a financial link between old and new ships. By rewarding responsible recycling and incentivising new shipbuilding in India, the scheme is expected to boost domestic shipyards, generate employment, and reduce the outflow of ships sent abroad for dismantling.